The answers vary depending on the verbiage in the agreement the alarm company is being asked to sign, but it can range from no big deal… all the way up to providing MORE coverage for the Additional Insured than it does for the primary policyholder. As you point out, the agreements from the alarm company’s customer that contain the Additional Insured requirement are all Risk Transfer efforts designed to move as much exposure as possible from that customer back over to its vendors.
My customers ask me all the time, “can I comply with the insurance requirement in this contract”, and sometimes I have to tell them “no” when the requirements are out of date or misworded, or referencing insurance forms that have been out of circulation for decades, and/or ask for liability limits so high that only large companies can afford them. However, I tell them they may still find out the insurance they already have MIGHT be accepted if they just submit it and see if their customer accepts it.
Admittedly, acceptance of your insurance does not mean compliance with the contract, it just means you can get paid for the work you’re doing at present. But I can’t comment about interpreting and responding to an agreement that might be poorly constructed, for that you’ll need Ken’s services.
But here’s the thing: most standard General Liability policies will include a basic Blanket Additional Insured endorsement. This basically says that anyone our insured has a contract with that requires they be Additionally Insured, is. Basically, the idea is that if, while an alarm company is providing ongoing operations for the customer, the customer gets sued due to the alarm company’s negligence, then the alarm company’s insurance will indemnify the customer. Standard stuff. No extra cost, and the certificate confirming the status is quick to issue.
However, that doesn’t address the extra clauses the customer’s agreement may contain, that are designed to transfer MORE risk, MORE burden back over to its vendors.
- Making the alarm company’s insurance primary (first to have to pay) even in cases where the customer is partially negligent or even completely negligent (“Primary and Noncontributory wording”)
- Restricting the alarm company’s insurance from seeking reimbursement if it pays out first due to an agreement even when the customer is negligent (“Waiver of Subrogation”)
- Making the alarm company responsible for the customer’s premises it worked on AFTER all operations and services have ended (“Completed Operations”)
- Customer requiring 30 days written notice directly from the alarm company’s insurance company if any condition of their policy changes or cancels
- Customer requiring that alarm company’s insurance plan’s full policy limit is guaranteed to be fully available, even if other claims have already been paid that year (“Per Project Aggregate”)
These clauses can be costly to get your insurance to comply with because insurers know that compliance equals taking on whole lot more risk.
We see these requests included on customer agreements all the time, but what’s interesting is that they’re not always enforced. What we always encourage our insureds to do is to provide a certificate including whatever type of Additional Insured they already have included in their policy, and then see what kind of response their customer comes back with. Many times we will see a much less onerous level of coverage accepted than what is spelled out in whatever boilerplate the alarm company’s customer may have used to create its agreement.
Or, if you know you’re going to have a lot of customers that have onerous requirements like these, and they pay well enough to justify it, you can upgrade your policy to include all of that wording by default. That’s an option too.
So end the end, what’s reasonable is often defined by what’s accepted. And it always behooves the alarm company to push back a bit when confronted with insurance requirements that are outside what they’ve already found to be commonly accepted. We help our clients navigate this daily, and the relief usually starts just with the knowledge that they CAN push back and likely reach a compromise.
Would you like more information on the topic? Call Eclipse Insurance and Risk Management Services today! 800-530-4448